Communications Experts Advise: ‘Keep it Simple’

The buzz around alternative investments continues to grow, largely due to attention put on their inclusion in defined contribution plan investment menus by President Donald Trump’s 2025 executive order and the Department of Labor’s proposed rule implementing it.

The rule outlines a six-part test for prudence in selecting investments, compliance with which would provide a safe harbor for creating defined contribution plan investment menus. For plan sponsors and communications consultants, the proposed rule and potential changes it could drive raise new questions about how to educate participants on the costs, risks and possible benefits of including alternative investments in DC plans.

Experts in retirement plan design, participant communications and employee benefits law have long held that if alternatives are incorporated into DC plans, it will likely be within professionally managed vehicles. The experts advise that communications about any new investment offerings focus first and foremost on simplicity.

Navigating Initial Questions

Teresa Hassara, a senior vice president for retirement and income solutions at Principal Financial Group, says that, for now, plan sponsors are largely approaching alternative investments as a fiduciary and plan design question.

“What we’re hearing is that sponsors aren’t starting with, ‘How do we explain alternatives?’” Hassara says. “They’re starting with, ‘Do alternatives enrich the plan menu and options for participants and, if so, how do we incorporate them responsibly?’ That evaluation often includes engaging with advisers, meeting with participant groups, asking hard questions and taking time to study both the opportunity and the operational implications.”

Allie Itami, a partner in Lathrop GPM specializing in employee benefits and retirement plan matters, similarly says it is too early to see much increase in formal participant communications that focus primarily on the proposed rule .

“Eventually, if included on the plan’s investment lineup, the required participant disclosures will need to include information that reflects the impact of the inclusion of alternative investments,” Itami explains. “At this time, plan sponsors are more reacting to participant questions or participant opinion statements.”

Itami says participant-generated communications will help individual sponsors gauge their participants’ potential interest.

 A Focus on Direct Explanations

Kelli Send, vice president of financial wellness services for the retirement plan consulting firm Francis, sees the surging demand for target-date funds as an indication that a majority of plan participants are not engaged enough in their investment decisions to want individual investments in the first place. Send points to a recent Morningstar analysis which showed that target-date funds reached $4.8 trillion in assets by the end of 2025.

As such, Send advises plan sponsors to approach alternatives education as part of a lesson in diversification.

Alternatives “need to be included in something that automatically helps each person make their decision, as part of a model portfolio or managed accounts, and/or included in target-date funds,” Send says. “When we’ve added commodities to plans—and I would say 90% of our plans have a commodity fund—we teach it as, ‘It zigs when everything else zags, and it’s important to be included in the total mix.’ The education piece of it is just really part of an overall diversification story.”

Megan Yost, senior vice president of thought leadership and insights at Segal, agrees that communication about alternative investments should be straightforward and contextual. Yost says sponsors should broach the discussion in familiar terms, running participants through the overall investment strategy, the types of assets included, and the potential risks, benefits and fee implications associated with the change.

“Whether or not plan sponsors include alternative investments in DC plans, it doesn’t change communication best practices,” Yost says. “Participants are looking for straightforward, direct explanations about the investments in their DC plan. They’re also looking for clear, up-front information about cost and access to their savings.”

Avoiding Pitfalls

Itami points out that plan sponsors must be mindful of managing participants’ expectations.

“A common misunderstanding from participants can be that upon reading about the proposal in the news, the alternative investment options are immediately available on their own plan’s lineup,” she says. “There does need to be some education about the time it takes for a proposal to be finalized and for investment products to be widely available for selection, plus the investment selection process itself takes time.”

 However, managing expectations should not come at the expense of clarity and simplicity.